The amount is N4 billion higher than N45.9 billion recorded by the same banks in the preceding period of 2016, representing 8 per cent jump. It is also 4.1 per cent of N2.11 trillion, being half of Federal Inland Revenue Service (FIRS) N4.22 trillion target for 2017.
Data obtained from the banks’ H1 2017 results submitted to the NSE showed that four of the banks are in Tier 1 category, while six fall under Tier 2. The categorisation, adopted by the Central Bank of Nigeria (CBN), reflects the position and strength of the banks vis-a-vis factors that serve as buffers in the event of industry challenges. Such challenges include currency devaluation, financial crisis, regulatory interventions and macroeconomic trends that impact asset quality.
All the banks surveyed, except one, are new generation lenders. They include Guaranty Trust Bank (GTB), Zenith Bank, Access Bank and United Bank for Africa (UBA). Others are Stanbic IBTC, Fidelity, Diamond and First City Monument Bank (FCMB). Data contained in reports of Sterling and Wema Banks were also examined. The N50 billion income tax liabilities were aggregated from figures contained in audited and unaudited results of the affected banks. Five of the results were audited.
Company Income Tax is payable for each year of assessment of the profits of any company at a rate of 30 per cent. Firms listed on the NSE are required to file their yearly and quarterly financial reports – 30 days after the end of the quarter in accordance with NSE’s post-listing rules. Defaulting companies are tagged “MRF” (Missed Regulatory Filing) with heavy sanctions meted out to them, which impact negatively on current assets, shareholders’ funds and other fundamental parameters.
Nigerian banks do not run uniform year-end financial cycles. This is due to circumstances that affected their operations at different times in the past; such as recapitalisation and other regulatory interventions. Yet, they enjoy the reputation of being hardly caught up in the web of NSE sanctions frequently meted out to the ‘Carriers & Insurance’ category of the Financial Services sector. Forty-nine (49) listed companies are presently tagged with the “MRF” red alert for various operating deficiencies, including regulatory filing and other post-listing contraventions.
Further analysis of the published results revealed that the N50 billion income tax liabilities posted by the 10 surveyed banks represent 75.6 per cent drop in aggregate pre-tax profits compared to the preceding period in 2016. Similarly, aggregate pre-tax profits of the selected banks amounted to N432 billion in 2017 as against N1.77 trillion recorded in H1 2016, a hefty N1.34 trillion decline. Besides operational vagaries, the wide gap occurred from adjustments made by some banks in their individual Accounts during the periods relating to their peculiar circumstances.
Similarly, aggregate post-tax profit of the 10 surveyed banks in H1 2017 amounted to N383.46 billion – a huge drop of N1.34 trillion or 77.8 per cent from N1.72 trillion posted in 2016 half year. Total operating expenses (tagged ‘Other operating expenses’, not related to fees and commissions, interest expense and group operations, for instance) dropped to N394.83 billion from N507.48 billion, for H1 2017 and 2016 respectively. This shows a savings of N122.64 billion or 22 per cent gained from strategic upscale in operating efficiency..
Nigerian government has mainstreamed into radical tax reforms since the recession to deepen alternative revenue sources and drastically reduce the preponderance of dependence on crude oil sales by the three tiers of government. This includes several tax holiday measures and the Voluntary Asset and Income Declaration Scheme (VAIDS), a unique initiative introduced in July 2017 with Tax Amnesty Programme (TAP) as a key component. This led to the ambitious FIRS N2.44 trillion revenue target for 2017.
Tax experts harp on instituting sustainably conducive business environment as imperative towards achieving government goals of diversification. This, in their view, will yield the desired boost in alternative tax revenue from oil and gas sector. They also see prospects in an environment that offers the private sector the desired operating latitude to create jobs and boost the nation’s GDP.
“Reforming the business environment is imperative to boost investments and growth like we have stated in our report. Nigeria ranks 169 of 190 economies on the ease of doing business ranking which is a reflection of how difficult the business environment could be. However, a number of reforms are being implemented by the executive specifically in easing the legal and regulatory hurdles of setting up a business which should be impactful in boosting investments”, Taiwo Oyelele of PwC, a multinational firm of advisory and tax services said in an e-mail response, citing an earlier report on the subject-matter.
On the tax liabilities posted by the banks, Chukwuemeka Eze, a Legal Practitioner and member, Chartered Institute of Taxation of Nigeria (CITN) explained that various factors such as capital allowance and tax incentive claims account for the rise and drop in tax figures posted by the lenders during the periods. He sees this factor as capable of “disrupting” the expected outcome in a particular accounting year. Some of the factors “relate to capital allowance claimed by the company in a particular year. If it claims less capital allowance, the aggregate company’s income tax payable might be low. Another factor could arise from tax incentives claimable for either year. If the tax incentive claimed in a particular year is high, the tax payable may be low”, Eze said in an SMS response on the matter.